Council approves refinancing bonds

A 7-1 vote in favor of refinancing the 2002 Lease Revenue Bonds and authorization to borrow 2011-13 capital funds was approved at the Common Council meeting held Dec. 14.

December 29, 2010

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A 7-1 vote in favor of refinancing the 2002 Lease Revenue Bonds and authorization to borrow 2011-13 capital funds was approved at the Common Council meeting held Dec. 14.

“Based on the 2011 budget approval, it has been determined that we will borrow $1,300,000 for capital projects to be undertaken in years 2011-13,” said City Administrator Lisa Kuss in a memo to council members and city staff. “To finance this purpose, a total of $1,350,000 in General Obligation notes would be issued, which includes capitalized interest (1st year’s interest payment) and issuance expense. We had originally planned to conduct a competitive sale of these notes on Jan. 11, 2011 if authorized by the council.

“Recently, we found out that the Redevelopment Authority (RDA) 2002 Lease Revenue Bonds could be refinanced at lower interest rates, resulting in substantial savings in Tax Increment Financing (TIF) Districts 3 and 5 (Industrial Park, Angelus). The savings would be in the range of $300,000 to $400,000,” Kuss stated. “The existing Lease Revenue Bonds are not a General Obligation of the city, and do not count against our debt limit. Normally, we would look to execute this type of refinancing with new Lease Revenue Bonds. Unfortunately, there is no longer much of a market for these types of bonds due to the economic downturn we have experienced and investor reluctance to purchase less secure municipal investments. We did speak with the state’s most prominent underwriter of Lease Revenue securities, who affirmed this.

“While the city would be unable to refinance the 2002 bonds with new revenue obligations, it would have the option to convert the debt to a General Obligation,” Kuss continued. “The disadvantage is that this new debt would now count against our 5 percent limit. We would now be securing repayment of the TIF debt with the general tax levy versus just tax increments, although we assume that if tax increment were ever insufficient to make the payments, the city would step in to assume the payments in any event.

“There are several advantages,” said Kuss. “First, savings would be greater as the interest rate for General Obligation debt will be lower than revenue debt. Second, there are less costs of issuance associated with General Obligation debt, which adds to savings. Lastly, the city would be able to apply the bond reserve fund ($371,833 held by Associated Trust as agent) to reduce the size of the borrowing.

“We recommend a single General Obligation note issue for both the 2011-13 capital projects and the refinancing. Since the RDA bonds are not pre-payable until June 1, 2011, we would need to delay the note sale from the originally planned Jan. 11, 2011 sale date to March 8, 2011. Although this date is still prior to the pre-payable date, IRS rules allow you to issue refinancing obligations within a 90-day window preceding the pre-payable date,” Kuss concluded.

The council approved including the refinancing as General Obligation debt and authorized the issuance of $3,395,000 in General Obligation notes for sale on March 8, 2011; this includes $1,335,000 for the capital projects money and $2,060,000 for the refinancing. The reason less notes are issued for the capital projects under this option is that the costs of issuance, while greater overall, are able to be spread out between the two components of the borrowing.

The council also approved a stipulation that will allow Ehlers Associates to offer just the capital projects portion of the notes for an earlier sale to avoid the possibility of increased tax levy impact, if they have concerns with the possibility of interest rates increasing substantially between January and March. If the interest rates increase more than one-quarter of a percent over that two-month period, the additional interest expense would offset the $15,000 in issuance expense savings achieved by using a single borrowing.

Clintonville resident Gary Hagberg spoke during the citizen’s forum, commenting on how well the Street Department handled snow removal following the winter storms that hit on Dec. 10-11. “I want to thank the city staff and Street Department members for the job they did to get the streets clear,” Hagberg said. “I got up at 5 a.m. on Sunday morning, and the streets were beautiful. They were cleared off and fully passable-that’s phenomenal! That’s the way to do things.

“I also want to thank you good people who donate your time to the community,” Hagberg said, addressing the council members. “Yes, your job does pay a small amount, but it’s very small compared to the amount of time you put into this job. Thank you all and God bless you all.”

The council went on to approve the purchase of “Keys to the City” key chains. The city will pay roughly $200 of the total cost, while Magee will pay around $300 of her own money towards purchasing 100 of the key chains.

Magee also asked the council to have the Main Street flower baskets put up for bids this coming year, rather than using the previous supplier without a bidding process.

The council also approved resolution 2010-17 authorizing the sale and issuance of $488,000 taxable General Obligation Bonds, and also voted to accept a newly outfitted 2003 Ford F450 from the Clintonville Firemen’s Association. The truck will be a valuable asset to the department’s fleet of vehicles. The council also approved the donation of the old 1968 Dodge truck to the Clintonville Firemen’s Association.

A payment to the Northern Waupaca County Joint Municipal Court of $6,001 to continue operations of the court and it’s service to Clintonville was approved, along with the carryover of 2010 funds to 2011 for the purchase of a side wing plow. This will not be purchased until 2011, though the funds are in 2010. The total amount is $14,900.

Resolution 2010-16 concerning the city’s emergency operations plan was also discussed, which designates officials to help manage the city in case of an emergency. Centers of operation were also designated, with backup options in place if one of the sites were to be unavailable in the event of an emergency.

The council also voted to approve the 2011 public utilities benefits amount for families who qualify for utility assistance based on income. The amount is set at $40 per person in the home.

Ordinances 1063 and 1065, relating to residency requirements and daytime curfew, passed their second reading.